What is the percentage dilution to existing shareholders from the issuance of 99,065,330 units at $2.05 each?
Answer – Dilution Calculation
The dilution to existing shareholders is determined by the proportion of the new units relative to the total share count after the private‑placement closes:
[
\text{Dilution (\%)} \;=\; \frac{\text{New Units}}{\text{Pre‑existing Shares} + \text{New Units}}\times 100
]
- New Units issued: 99,065,330
- Issue price: US $2.05 (used only to confirm the gross proceeds of ≈ US $203 million; it does not affect the dilution percentage).
Because the press release does not disclose the number of shares that were already outstanding before the placement, the exact dilution cannot be expressed as a single figure. However, the relationship is straightforward: the larger the pre‑existing share base, the lower the dilution, and vice‑versa.
| Hypothetical pre‑existing shares | Dilution |
|---|---|
| 150 million | 39.7 % |
| 200 million | 33.1 % |
| 300 million | 24.8 % |
| 400 million | 19.8 % |
Trading implications
- Capital‑raising benefit vs. dilution cost: The $203 million net proceeds will bolster Osisko Development’s balance sheet, fund near‑term projects, and potentially improve cash‑flow coverage. Even a 30‑% dilution (as in the 200 M‑share example) may be justified if the capital is deployed to generate higher earnings per share (EPS) growth than the dilution effect.
- Price pressure: In the short term, the market often reacts to the “supply” of new shares with a modest downward bias, especially if the existing float is sizable. Expect a modest‑to‑moderate price dip on the announcement day, followed by a rebound if the proceeds are clearly earmarked for value‑adding projects.
- Technical view: Look for a sell‑the‑breakout pattern on the first 1–2 % of the daily volume as the market digests the dilution. If the price holds above the breakout level, it signals that the market is already pricing in the capital raise, and the trade‑bias can shift to long on the next pull‑back (≈ 3–5 % lower) with a stop just below the recent low.
Actionable take‑away: Until the exact pre‑existing share count is disclosed, treat the dilution as “up to ~40 %” in a worst‑case scenario. Focus on the fundamentals—use of the $203 M proceeds, project pipeline, and cash‑flow outlook—to decide whether the short‑term dilution‑driven price pressure creates a buying opportunity on the dip. A disciplined entry on the pull‑back with a tight stop below the breakout low aligns with a risk‑managed, upside‑biased stance.